Business chiefs warn Cameron of referendum 'consequences'

DAVID CAMERON's promise to hold a referendum on Britain's membership of the EU has been met with a mixed response from business leaders, with one warning Britain will "suffer the consequences".

While 55 top bosses wrote an open letter to the The Times praising the prime minister's vow to renegotiate the UK's membership terms, the boss of US-based government bonds investor Pimco cast doubt on the move.

Mohamed El-Erian said uncertainty over the referendum's outcome would push up the cost of borrowing for the UK. "When you make a forward announcement - and he has made a forward announcement, this referendum is not anytime soon - people like us start putting in an uncertainty premium", he told the BBC.

The Guardian reports that other bosses have reacted cautiously to the prime minister's landmark speech. Sir Martin Sorrell, chief executive of advertising firm WPP, said the referendum promise was one of several "black and grey swans" with the potential to harm the economy. "This is a political decision, not an economic decision. If I am looking at it from WPP, it isn't good news."

Sir Roger Carr, chairman of the business lobby group the Campaign for British Industry, said: "The referendum builds in a degree of uncertainty and business never welcomes uncertainty".

Bosses who signed the Times letter - including leaders from Xstrata, Kingfisher, Dixons, Diageo, New Look and the London Stock Exchange - bemoaned the ever-growing "burdens from Brussels", saying EU red tape was a drag on commerce and that the PM was "right" to call for a new deal with the EU.

Cameron will come face-to-face with many of the biggest names in British business when he attends the World Economic Forum in Davos today. He is due to speak about Britain's priorities for the G8 and international cooperation over tax.